ALJDEC decisions subject to certification as final

2010A-308474188-ROC · Registrar of Contractors · 2011-09-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 15, 2011, June 7, 2011, August 8, 2011, and August 9, 2011. The record was kept open until August 19, 2011, to allow the parties to submit written closing arguments. APPEARANCES: On April 15, 2011, Cie and Aaron Scott appeared personally and they were represented by their attorney, Hank Pearson, Esq. Mr. Pearson and his law firm later withdrew from representing the Scotts. Thereafter, the Scotts represented themselves. AppleCreek General Contractors, L.L.C. was represented by its attorneys, Joe O’Connor, Esq. and Timothy R. Durfield, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Recommended Order: FINDINGS OF FACT 1. AppleCreek General Contractors, L.L.C. (“Respondent”) is the holder of License No. 190705, a Class B contracting license issued by the Registrar of Contractors (“Registrar”). 2. On June 30, 2010, Cie and Aaron Scott (“Complainants”) filed a written Complaint with the Registrar alleging statutory and regulatory violations by Respondent on a remodeling project at a rental house located at 425 Brewer Road, Sedona, Arizona. The Registrar designated the Complaint as Case No. 2010-[number redacted]. 3. In response to Complainants’ Complaint, the Registrar’s assigned inspector, Cliff Frandsen, performed a jobsite inspection to view the Complaint items. As a result of that inspection, Inspector Frandsen issued a Corrective Work Order dated August 6, 2010, that required Respondent to timely perform the following remedial action: The contractor shall take necessary and proper action to fulfill all signed contractual obligations regarding this project, and to complete the work started in a timely and workmanlike manner. The contractor shall correct these deficiencies:

#1. Install the raised ridge metal roof. #2. Connect the plumbing to the sewer main. #3. Install the cabinets, countertops, sinks and plumbing trim. #4. Hang the doors and install the appropriate hardware on these doors. #5. Install the interior trim on the doors and the base trim on the floors. #6. Install the vinyl flooring material. #7. Finish installing the sheetrock and repair various holes in the sheetrock caused during construction. #8. Complete the tile work in two showers. #9. Connect the water softener to the plumbing loop as indicated in the contract. #10. Install the electrical trim. #11. Properly secure the attic gable vent door. #12. Install the owner supplied A/C mini split system. #13. Complete the interior and exterior painting. #14. Install the bathroom hardware and the R/O water system as indicated in the contract. #15. Complete the upstairs roof walking deck per contract, plans and building codes. All work on this project shall be completed in compliance with the local Building Official.

4. On August 23, 2010, Complainants filed an addendum to their Complaint that listed the following additional Complaint items: 1) The downstairs Milgard 3-0/3-0 window that was broken by one of the workmen needs to be replaced. 2) Reinstall a utility door between the two garage bays. 3) Fill the large hole dug in the driveway searching for the sewer main. 4) Provide one roll-off dumpster for all of the construction debris currently onsite. 5) Relocate the outdoor GFCI [sic] electrical outlet on the South wall of the first floor addition to 24” height per the plans. (It was placed at 72”). 6) Reinstall the fluorescent garage lights in both garage stalls. 7) Complete the retention wall and drainage ditch on the South side of the addition per the plans.

5. Inspector Frandsen performed a second jobsite inspection as a result of the addendum to the Complaint. As a result of the second inspection, Inspector Frandsen issued a Corrective Work Order dated October 1, 2010, that contains Inspector Frandsen’s findings as to the addendum Complaint items: This is an addendum to the Corrective Work Order issued on 8/06/10 and addresses a seven item [sic] addendum to the complaint: #1. This inspector cannot determine who might have broken this window. There is no action required of the contractor regarding this item. Regarding items #2 through #7: It appears the general dispute in this complaint involves two sets of plans for the project and a series of change orders that were requested by the complainants. The plans used as the bid set were dated March 15, 2010. The Respondent signed a contract with the complainants on May 6, 2010. At the time the contract was signed, the City had not yet approved the plans for the remodel. Later on in May of 2010, a revised set of plans were issued and approved by the City. It is the opinion of this inspector that items #2, 5, 6 and 7 were not covered by the contract or the original bid plans. There is no action required of the contractor on these items. Items #3 and 4 were no longer an issue at the time of the inspection.

6. The Registrar issued a Citation and Complaint in Case No. 2010- [number redacted] charging Respondent with violating the provisions of A.R.S. § 32-1154(A) (1), (2), (3), namely A.A.C. R4-9-108, (10), and (23). 7. The Registrar forwarded Case No. 2010-[number redacted] to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 8. The subject property is owned by BBSHH, L.L.C. Complainants are the members of BBSHH, L.L.C. 9. The subject property is a rental property. During the relevant times of the subject project, at least one tenant was living at the property. 10. The remodeling of the subject property began with Guerrilla Building as the general contractor. After getting into a dispute with Complainant, Guerrilla Building left the job. 11. Complainants later asked Scott Podergois, on behalf of Respondent, to bid on the project from a set of plans not approved by the City of Sedona.[1] After accepting Respondent’s bid proposal, Complainants submitted a set of plans to the City of Sedona for approval. The plans were eventually approved by the City with required modifications. 12. Since the approved plans differed from the non-approved plans, Respondent’s bid does not include any modifications to the plans by the City of Sedona. Complainants are entitled to a credit for any work deleted from the original plans in the approved plans, and Respondent is entitled to payment for any work it performed that was not included in the original plans. 13. On May 6, 2010, Complainant Cie Scott and Scott Podergois, on behalf of Respondent, executed the “Sedona-Scott Residence Phase I Building Agreement” dated April 28, 2010 (“Contract”). Scott Podergois is listed as “Project Manager” on page one of the Contract. 14. Scott Podergois executed the Contract below Respondent’s printed name and above the printed name of “Scott Rhoades Builder/Representative.” 15. Complainant Cie Scott made several changes to the Contract and the attached Contract Document I. Complainant Cie Scott and Scott Podergois also executed the Contract Document I attachment. 16. After receiving a copy of the executed Contract, Respondent’s qualifying party and member, Scott Rhodes, reviewed the Contract. Scott Podergois was not authorized to execute contracts on behalf of Respondent. Therefore, Mr. Rhodes executed the Contract and Contract Document I after deleting Complainant Cie Scott’s amendments and returned a copy with his signatures to Complainants. 17. Complainants were “hands-on” during Respondent’s performance on the project. Scott Podergois was the project manager on site during Respondent’s work. 18. Complainants made payment to Scott Podergois instead of paying Respondent. There is credible evidence that Scott Podergois did not forward the payment to Respondent. 19. Complainants also entered into at least one side contract with Scott Podergois for the purchase of a water heater. The origin of the water heater is highly questionable. 20. Scott Podergois is a convicted felon who has a history of unlicensed contracting. Scott Podergois was recently incarcerated on a probation violation. 21. Steve Willoughby, an investigator for the Registrar, testified that Scott Podergois was paid by Respondent as a form 1099 independent contractor.[2] Scott Podergois does not possess a contracting license. Therefore, Scott Podergois is determined not to have been an employee of Respondent on the subject project. 22. There is credible evidence establishing that Respondent failed to comply with the Registrar’s Corrective Work Order dated August 6, 2010 that required Respondent to perform remedial work to bring the specified work items up to workmanship standards and into compliance with local building code requirements. 23. The Corrective Work Order dated October 1, 2010 did not require Respondent to perform any remedial work. 24. At the hearing, Complainants introduced new items of alleged deficient workmanship that were not included in the fifteen items listed in their Complaint or the seven items listed in their addendum to the Complaint. Those new items are determined to be outside the scope of the above-entitled case. 25. As to the charged violation of A.R.S. § 32-1154(A) (1) of abandonment, Respondent contends that A.R.S. § 32-1129.04(A) authorized it to stop work on the subject project due to nonpayment of monies due from Complainants. The parties have a bona fide monetary dispute that is pending before the Superior Court of Maricopa County, Arizona. The Registrar is not empowered to settle such monetary disputes. See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 430, 434 (Ct. App. 1990). The parties’ monetary dispute must be resolved in their civil litigation where the interests of all parties can be fully addressed, rather than in an administrative disciplinary proceeding before the Registrar where all claims cannot be litigated or, even if proven, enforced. 26. Any item not specifically addressed in the above Findings of Fact is determined to be outside the scope of the Complaint and the addendum to it, to meet workmanship standards, or to lack sufficient evidence of record to support a finding of a statutory and/or regulatory violation. 27. A review of the Registrar’s official public electronic licensing records reveals that Respondent’s License No. 190705 became inactive on June 21, 2011, and was voluntarily cancelled on July 13, 2011. CONCLUSIONS OF LAW 1. The Registrar has jurisdiction over Respondent and the subject matter in this case. 2. Pursuant to A.R.S. § 32-1154(C), the voluntary cancellation of Respondent’s contracting license does not deprive the Registrar of the authority to discipline that license for proven statutory and/or regulatory violations in this matter. 3. Pursuant to A.A.C. R2-19-119(B), Complainants have the burden of proof in this matter. The standard of proof is by a preponderance of the evidence. A.A.C. R2-19-119(A). 4. A decision by the Superior Court as to whether or not Respondent legally terminated the parties’ contract is necessary to determine whether or not Respondent violated the provisions of A.R.S. § 32- 1154(A) (1), (2), (3), namely A.A.C. R4-9-108, and (23). Therefore, no violations of those charged violations by Respondent are found at this time by this tribunal. 5. Respondent violated the provisions of A.R.S. § 32-1154(A) (10), as charged in the Citation and Complaint issued by the Registrar. Respondent aided and abetted the unlicensed contracting of Scott Podergois, as described in the above Findings of Fact. 6. The Administrative Law Judge declines Complainants’ request for restitution in this matter, pursuant to A.R.S. § 32-1156.01. The parties’ pending civil litigation is the proper forum for resolving the monetary dispute between the parties. RECOMMENDED ORDER Respondent’s License No. 190705 shall be placed on suspension for a period of five days commencing on the effective date of the Order entered in Case No. 2010-[number redacted]. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of that certification.

Done this day, September 9, 2011.

/s/ Brian Brendan Tully Administrative Law Judge Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Presumably, Guerrilla Builders performed some work on the project without a City approved set of plans obtained from Complainants. [2] A form 1099 is used to notify the Internal Revenue Service (“IRS”) of monies paid to independent contractors from which no taxes have been withheld. The IRS requires businesses to submit a 1099 form for every contractor that is paid at least $600.00 for services during a year. See IRS 2011 Instructions for Form 1099-MISC.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826